Question of the day: Who approved the cut in the state tax credit for dependents?

Q: Matt B. has a question about my Net Worth column on the big cut in California’s state-income-tax credit for dependents. “Was this done through the Legislature or what? Your article doesn’t make clear who made the decision or when.”

A: The cut was included in the mammoth budget package passed by the Legislature and signed on Feb. 20 by Gov. Schwarzenegger. The bill cut the exemption credit from $309 per dependent in 2008 to roughly $99 per dependent in 2009 and 2010. The cut got much less attention than other revenue raisers in the budget bill, such as increases in the state income tax, sales tax and vehicle license fees.

Unlike a tax deduction, which reduces your adjusted gross income before taxes are calculated, the exemption credit reduces your tax bill dollar for dollar. So the change will end up costing parents roughly $210 per dependent.